(Bloomberg) – US consumer spending and earnings fell more than forecast in November, and unemployment benefits remained high last week, with the latest signs that the fall in coronavirus cases is affecting the economic recovery.
Initial unemployment claims in regular state programs fell 89,000 to 803,000 in the week ended Dec. 19, according to the Labor Department on Wednesday, compared to economists’ median projection of 880,000. On an unadjusted basis, applications fell by about 73,000.
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A separate report from the Commerce Department showed that consumer spending, which accounts for a majority of the economy, fell 0.4 percent last month – the first decline since April. Personal income fell 1.1%, reflecting the liquidation of several pandemic relief programs.
The data shows an American economy that is declining by the end of the year and suggests that many Americans will struggle in the coming months as coronavirus cases increase across the country. Many businesses are also facing closure or layoffs, amid colder weather and less foot traffic.
The distribution of vaccines offers hope on the horizon, and the fiscal stimulus package approved by Congress this week should provide relief, although President Donald Trump’s remarks late Tuesday called into question the fate of the deal.
“The economy is still pretty soft,” said Scott Brown, chief economist at Raymond James Financial Inc. “The level of unemployment claims suggests that there is still weakness in the labor market,” while spending, “see the impact of the pandemic on the season: There are fewer seasonal purchases than usual, there are fewer seasonal trips. “
Other reports on Wednesday showed that new home sales plummeted unexpectedly to a five-month low, while consumer sentiment and a proxy for business investment followed forecasts.
US stocks rose further as investors seemed ready to derail the president’s comments on the promise of a pandemic relief sooner or later. 10-year Treasury yields rose, while the dollar fell.
Beneficiaries Beneficiaries
Department of Labor figures show that continued demand, which roughly approximates the total fund of state benefit recipients, fell by 170,000 to 5.34 million in the week ended December 12. to be extended under the new fiscal stimulus package.
Even with declining initial unemployment claims, the level remains almost four times higher than it was before the pandemic, and the four-week average has risen to a two-month high. California and New York accounted for most of the decline on an unadjusted basis.
More than half of the states reported a decline in initial claims, while Illinois, Virginia and Pennsylvania saw an increase in claims last week.
The decline in spending, which exceeded estimates in Bloomberg’s survey of economists, followed a revised downward increase of 0.3% in October. Expenditure on goods fell by 1%, due to new clothing, footwear and vehicles. Expenditure on services fell on food and accommodation services.
“We’re losing momentum at a critical juncture,” Diane Swonk, chief economist at Grant Thornton in Chicago, told Bloomberg Television. “Consumer spending is shrinking or slowing down at a time when we should be growing, and that’s because of the increase in Covid cases.”
Also on Wednesday, data showed that orders for durable goods in the US rose in November by more than had been forecast. But a proxy measure for business investment – non-defense capital goods orders, excluding aircraft – rose 0.4%, less than the 0.6% estimate, following a revised 1.6 % in October.
The weekly report on unemployment complaints is usually published on Thursday, but has been moved because the federal government will be closed on December 24.
(Adds data on new home sales, consumer sentiment.)
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